July 26, 2018 / 11:17 AM / 3 months ago

UPDATE 2-Indonesia pushes back coal, palm oil insurance rules to Feb 2019

(Adds trade ministry comment)

By Fergus Jensen and Bernadette Christina Munthe

JAKARTA, July 26 (Reuters) - Indonesia’s trade ministry has decided to postpone for six months the application of rules requiring coal and crude palm oil export shipments to use Indonesian insurance, ministry officials said.

Indonesia is the world’s biggest exporter of thermal coal and palm oil.

The decision is the second time the rules, issued in October and due to come into effect on Aug. 1, have been postponed.

The rules were part of trade regulations issued in October that were intended to boost the role of the archipelago’s shipping industry and save foreign currency, part of which were postponed to 2020.

The insurance rules would be “postponed to Feb. 1, 2019” Trade Ministry spokeswoman Fajarini Puntodewi told Reuters by text message.

The decision was announced to industry representatives at a brief meeting earlier on Thursday, Indonesian Coal Mining Association (ICMA) Executive Director Hendra Sinadia told Reuters.

“Everybody is very anxious,” Sinadia said, referring to coal buyers and exporters confused about how they could put the rules into practice for shipments sold on a free-on-board (FOB) basis, on which the vast majority of Indonesia’s coal exports are sent.

Under FOB terms insurance is the responsibility of the buyer, Sinadia noted.

Ido Hotna Hutabarat, chief executive of coal miner Bumi Resources unit PT Arutmin Indonesia, said the rules were unworkable.

“This cannot be carried out for FOB sales because we don’t have rights to control the buyer,” he said, adding that FOB shipping terms were preferable as they were lower risk.

Indonesian Palm Oil Association (GAPKI) Executive Director Mukti Sardjono said on Wednesday GAPKI would discuss how to implement the rules with the Trade Ministry. “We hope the implementation of this regulation won’t be a disincentive for exports,” he said.

Dody Dalimunthe, executive director of the Association of General Insurance Companies of Indonesia (AAUI), said there were 73 Indonesian insurance firms that cover coal and CPO shipping. “And many companies already use this insurance,” he said.

Earlier, ICMA Chairman Pandu Sjahrir said diplomats from several countries including Japan had asked the trade ministry for a transition period for the insurance rules to come into effect. The Japanese embassy did not respond to a written request for comment.

Indonesia could produce up to 485 million tonnes of coal this year, around three-quarters of which would be exported, the government said in January.

Indonesia’s palm oil exports jumped 23 percent in 2017 to 31 million tonnes. (Reporting by Fergus Jensen, Bernadette Christina Munthe, Cindy Silviana and Wilda Asmarini Editing by Tom Hogue, David Holmes and Alexandra Hudson)

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